Pawning your guitar to get your sister that cycle she wanted is a touching thing to do. It helps you use the value of something you own to get something you want, without having to sell that object. Home Equity Loans work on similar lines and is available to fund those who already own a property. It is therefore a mortgage given against your property and can be used by you to meet any of your financial needs as long as you declare and give it in writing that the funds you receive will be used for legal purposes only and you can't even use this amount for speculation purposes. All this is to prevent any arm wrestling with the law and have a cleaner process.
||Home Equity Loans
|Loan is for property that has to be purchased
||Loan is for already purchased property
|End use of loan is monitored to make sure you use the money only for the purchase of the property.
||End use of loan is not monitored so the funds can be utilized to meet any financial requirements.
|Agreement value is taken as benchmark as it is finance for the property.
||Property needs to be value by the government or reliable valuer as the property is already purchased.
The requirements for a Home Equity Loan are similar to those of a Home Loan except that it is not yet available for NRIs.
Once again, the documents required for an HEL are the same as those required for a normal Home Loan. There are only three additions to this list of documents.
Firstly, you also need to hand over a photocopy of the property documents before the sanction.
Secondly, you need a valuation report stating the value of the property, as examined by the valuer appointed by the HFI.
Lastly, the assurance that you will not spend the money on illegalities, etc. Needs to be given in a declaration as per RBI norms
The term no strings attached can only be used while selling sandals and as is everything about life, these are the terms and conditions of HEL, apart from those for normal Home Loans also.
- Even though the loan can be utilized to meet any personal requirement of yours, you cannot use it for illegal motives and most HFIs ask you to write down your plans with their cash. This might not be a good time to bring up your child hood desire to burst a chemical bomb
- The tenure for this loan will be less than that of the residual age of the property and will range from between 5 to 10 years.
- NRIs cannot avail of HELs for the time being.
- While the loan eligibility amount calculation remains similar to normal Home Loans, the LTV ratio would be 50% to 60% as compared to the 85% of normal Home Loans.
- An HFI will make use of a valuer to determine and report the value of the property. The lower between the market valuation & that of the valuer is chosen as a basis on which the loan amount is calculated using the LTV ratio method.
- The disbursement of the loan amount is always in your favour.